Nicor unit's payment plan under fire

Nicor Solutions' Fixed Bill program deceptive to consumers, CUB says

Ralph Canaday believed he was dealing with Nicor Gas last spring when he signed up for a program that he thought would save him some money.

"But that wasn't anything like what it turned out to be," said Canaday, a Hanover Park illustrator of children's books. "I am embarrassed to say I fell for it."

His wife, Pat, isn't embarrassed. She is irritated. "Who in their right mind would agree to this?" she asked, after discovering this summer that her gas bill had gone up.

In a 2-year-old class-action lawsuit, the Citizens Utility Board alleges that Nicor Solutions, an unregulated corporate sibling of Nicor Gas, has duped thousands of people like the Canadays into accepting a payment plan called Fixed Bill.

The plan promises customers they will be charged the same amount each month, even if gas prices go up. With the traditional payment plan at Nicor Gas, customers can see their bill rise sharply in the winter if the wholesale price of gas surges.

But CUB, which was involved in a case last week in which the Illinois Commerce Commission fined an unregulated subsidiary of Peoples Energy Inc. $40,000 for misleading customers, says that Fixed Bill's protection against unexpectedly high gas charges comes at an excessive price and that its marketing is deceptive and fraudulent.

In the Canadays' case, the couple's bill went from an average of $150 a month to nearly $196.

They got off easy compared to some.

"We have seen markups of as much as 100 and 150 percent. It is possible that you benefit if prices go really crazy, but in most cases consumers lose out," said Rob Kelter, a lawyer for CUB, which went to court and not to the ICC in the Nicor case because it thought its chances of winning were better.

Kris Lathan, a spokeswoman for Nicor Solutions and Nicor Gas, said customers buy Fixed Bill because they want predictability in their monthly service charge.

"This product is a protection product," Lathan said. "It has never been marketed and it doesn't purport to be a money-saving product."

As evidence that many people like Fixed Bill, Lathan said the program has a 90 percent renewal rate among its users. She also said that anyone choosing to leave the Fixed Bill plan could pay a penalty of as much as two times their monthly utility bill.

But there is confusion among some customers, who aren't clear what they are buying or who is selling it to them.

Canaday said he thought he was dealing with Nicor Gas, the government-regulated utility that serves 2 million suburban customers. He was mistaken.

The pitch he received in his Nicor Gas bill this spring came from Nicor Solutions, previously known as Nicor Services. Nicor Solutions markets Fixed Bill to customers of Nicor Gas, which continues to provide them service.

The ICC regulates Nicor Gas prices. Because it's not regulated, Nicor Solutions can charge what it likes. The businesses are subsidiaries of Naperville-based holding company Nicor Inc., which includes income from both in its earnings.

Distinguishing Nicor Gas from Nicor Solutions isn't easy, and not just because the names are similar and their corporate genealogy is tangled.

Nicor Solutions uses the same logo as Nicor Gas, right down to the lower case "n" and the italic "i" in the word "Nicor." The word "Solutions" appears in much smaller text than "Nicor."

Marketing literature for Nicor Solutions comes in the same envelope as the monthly bill from Nicor Gas. And when consumers sign up for Fixed Bill, the monthly service statement bears the words "Nicor Gas" in big letters at its top and bottom.

"They create the impression that it's Nicor the regulated utility," a CUB spokesman said. "It's basically the same name and logo as the [regulated] company."

A Nicor spokeswoman denied that consumers have difficulty distinguishing between Nicor Gas and Nicor Solutions. She said the difference is spelled out when customers sign a contract for Fixed Bill. She also noted that the ICC has approved Nicor Solutions' use of the Nicor name.

CUB, however, maintains that the confusion is intentional and that it extends to what Fixed Bill does.

Canaday, for example, said he thought he was signing up for a version of the Nicor Gas budget payment plan, in which Nicor Gas adds up a customer's total gas purchases from previous years, then bills in equal increments each month.

It allows customers to avoid the swollen gas bills of winter. Service is free, though customers may owe money or be due a refund after a year, depending on usage and gas prices.

"I thought that was what I was getting," Canaday said.

In financial circles Fixed Bill is referred to as a weather hedge, a kind of fiscal strategy that protects utilities from risk.

Nicor Gas charges customers for the volume of gas it delivers. A warm winter hurts profits because people use less gas to heat their homes.